Final Results

RNS Number : 2035N

Sirius Real Estate Limited

08 June 2010

 



Sirius Real Estate Limited

Final Results

For the year ended 31 March 2010

Sirius Real Estate Limited (the "Group", the "Company" or "Sirius"), the real estate company with a portfolio of 38 large mixed-use commercial sites in Germany, which have been significantly upgraded into modern, flexible workspaces, today reports its final results for the year ended 31 March 2010.

Highlights

Financial highlights

·      Property portfolio revalued at €500.0m (31 March 2009: €500.4m)

·      Gross rental income of €44.0m (2009: €43.7m)

·      Current annualised rent roll of €41.9m (2009: €43.7m)

·      PBT from recurring revenues was €0.8m¹ (2009: €5.5m), reflecting higher net interest and increased investment in efficiency measures, but excluding exceptional costs of €1.5m

·      Adjusted NAV per share 73.63c (31 March 2009: 83.49c)

·      Occupancy of 71.4%, increased from 68.5% as at 1 January 2010 (31 March 2009: 74.0%)

·      Average rent per sqm of €4.25 (31 March 2009: €4.15)

·      Operating within banking covenants

·      LTV across the portfolio as at 31 March 2010 of 62.2% (31 March 2009: 54.8%)

·      Cash balance of €33.4m (31 March 2009: €29.7m)

¹ Excluding property revaluation, exceptional costs, change in fair value of derivative financial instruments and non controlling interest.

Operating

·      Completed initial development phase, focus now on increasing occupancy and efficiency across the portfolio

·      Restructured German operating company

o  Reduced headcount

o  Doubled sales team to 40

o  Revamped marketing approach with specific online focus

o  Positive lettings trend for 2010 to date

·      Investing in efficiency measures

o  Recovering increased proportion of portfolio running costs

o  Increase in service charge prepayments received from tenants

·      Continued demand for our Smartspace initiative

·      Average monthly sales enquiries increased from 437 for period Apr-Dec 09 to 847 in Jan-Mar 10

·      Market conditions remain challenging but stable

Dick Kingston, Chairman of Sirius Real Estate Limited, said: "This was a challenging year in which we experienced substantial move outs, incurred one off costs from an aborted acquisition and bank loan restructuring, and invested significantly in operating efficiencies. While this investment has reduced profitability for the current year, we expect significant cost savings to be delivered thereafter. 

During the period the Company moved from the initial development phase of the business to focusing primarily on increasing occupancy and efficiency levels across the portfolio. A number of structural changes have been made in Germany, under the direction of Andrew Coombs, the recently appointed CEO of Sirius Facilities GmbH. The total headcount was reduced from 183 to 152, whilst the lettings team has doubled in size. This had an immediate positive impact on lettings in Q4. The introduction of new marketing initiatives, including a significantly expanded online strategy, also contributed to the uplift in sales inquiries and lettings in Q4.

Our increased penetration of the market is the key factor behind the improved sales performance, and we expect to deliver continued improvement over 2010 and 2011. Finally, I would like to welcome Walter Hens to the Board, following his appointment in February. Walter has brought with him extensive experience in the European real estate sector and is a valuable addition to the Board."

Enquiries:

Principle Capital Sirius Real Estate Asset Management Limited                                

Kevin Oppenheim, CEO                                                                          020 7632 4130

Alistair Marks, CFO

Mark Whitfeld, Investor Relations                                                            020 7240 3222

J.P. Morgan Cazenove                                               

Robert Fowlds                                                                                       020 7588 2828

Bronson Albery                         

KBC Peel Hunt Ltd

Capel Irwin                                                                                            020 7418 8900

Nicholas Marren

Cardew Group                                    

Tim Robertson                                                                                       020 7930 0777 

Catherine Maitland                                

Chairman's Statement

Introduction

I am pleased to announce the Group's full year results for the year to 31 March 2010. While these results reflect challenging market conditions, the fundamentals of the investor proposition remain unchanged. Sirius is the leading operator of branded business parks providing flexible workspace to the German SME market, and with the initial development phase now complete the management team are focused on increasing occupancy and driving cost efficiencies and recoverability of costs. Demand from the SME market remains stable, and new marketing initiatives are increasing our market share, as evidenced by the significantly higher level of leads generated from our online marketing strategy which has translated into increased lettings. We are also benefiting from continued improved recoverability of direct costs which has had a positive impact on cash flow.

Financial

Gross rental income for the year was €44.0m (2009: €43.7m). As at 31 March 2010, the annualised gross rent roll was €41.9m (2009: €42.0m), over a total lettable area of 1.15m sqm (2009: 1.1m sqm). The improved lettings in the year, particularly in Q4, were held back by some large tenant move outs at two of Sirius's 38 sites. PBT excluding property revaluation, change in fair value of derivatives financial instruments, exceptional costs and non controlling interests was €0.8m (2009: €5.5m). The main extra cost came from net interest due to higher borrowings throughout the year and much lower interest rates earned on deposits. Exceptional costs of approximately €1.2m were incurred in connection with the aborted acquisition of GPT Halverton's HBI portfolio, due to the substantial amount of due diligence and negotiations that were carried out and a fee of €0.25m on bank loan restructuring. The Company has also made a material investment to reduce the inherited running costs of the portfolio, which although reducing profitability in the current year, is expected to produce significant benefits thereafter.

As at 31 March 2010 occupancy was 71.4% (31 March 2009: 74.0%). This reflects an encouraging recovery from 1 January 2010, when occupancy stood at 68.5% immediately after the large tenant move outs at two sites. Over the year there were 115,860 sqm of move outs compared to 106,847 sqm of new lettings.

The adjusted EPS excluding property revaluation, change in fair value of derivative financial instruments, exceptional costs and non controlling interests was 0.54c (2009: 1.60c). 

NAV

As at 31 March 2010, the portfolio was valued independently by DTZ Zadelhoff Tie Leung GmbH at €500.0m (31 March 2009: €500.4m).

The portfolio, including vacant space, is valued on an average net initial yield of 6.9% (2009: 6.7%) and an average capital value per sqm of €434 (2009: €453).

The adjusted net asset value per share, which excludes the provisions for deferred tax and derivative financial instruments, was 73.6c as at 31 March 2010 (31 March 2009: 83.5c).

Finance

As at 31 March 2010 Sirius's borrowings excluding capitalised loan costs totalled €311.0m (31 March 2009: €274.2m).  ABN Amro Bank N.V. ("ABN") provide €96.3m and Landesbank Berlin AG and Berlin-Hannoversche Hypothekenbank AG ("LBB") provide €214.7m, representing an overall loan to value ratio ("LTV") of 62.2% (2009: 54.8%).

Sirius's banking facilities are all within their respective covenants. In February 2010 Sirius reported that large tenant move outs at two sites within the ABN financed portfolio had reduced Sirius's interest cover ratio ("ICR") for this facility. The ICR cover, as tested in January and again in April, remained above the covenanted level of 125% but fell below the 'cash trap' level of 130%. Sirius has been in close discussions with RBS (the owner of ABN), the result of which is the operation of the cash trap on the rent accounts of the companies within the ABN facility. However it has been agreed that funds in the rent accounts of companies with surpluses can be transferred to those with deficits for debt serving purposes, so the impact of the cash trap is minimal. The Board is confident that it has the flexibility to manage Sirius's financial position. 

Dividend

At this stage the focus is on increasing rental income and reducing the cost base of the business so that the Company can return to paying dividends in due course. We will continue to review this policy and expect to reinstate a progressive dividend once it is prudent to do so.

Asset Management

During the period the Company completed the initial development phase of the business and has moved on to focusing primarily on increasing occupancy and efficiency levels across the Company's 1.15m sqm portfolio. Andrew Coombs was appointed CEO of Sirius Facilities GmbH, the German operating company, in December 2009 and a number of positive structural changes have been made in Germany under Andrew's direction, as detailed below in the Asset Manager's Report. 

Board Appointment

Walter Hens was appointed as an independent Non-Executive Director in February 2010. Walter has over 37 years experience in the European real estate sector, including 20 years with SEGRO Plc, and is a Fellow of the Royal Institute of Chartered Surveyors. Walter's extensive experience makes him a valuable addition to the Board.   

Prospects and Outlook

The first nine months of the period under review were challenging for the business, however the last quarter saw a number of structural and operational changes, designed to improve performance, implemented across the business. The initial indications from these have been very positive, but it is anticipated that the full benefit will not be seen until the next financial year. Sirius's improved penetration into the existing market is the key factor behind the improved sales performance during the last quarter. The management team remains focused on driving occupancy and efficiency through the existing portfolio, initially towards and past 80%, and looks forward to providing an update on its initiatives during the remainder of 2010.

Asset Manager's Report

Asset Management

During the period we completed the initial development phase of the business and are now focused primarily on increasing occupancy and efficiency levels across the portfolio.  In the first instance this involves driving occupancy of the existing portfolio towards and past the 80% mark, improving the recoverability of service charge costs and property maintenance costs and reducing the Company's overheads.  All of these will equate to significant improvements to operating profit.  The business model remains strong and the results being achieved from the restructuring programme are encouraging.

The appetite from the SME sector for our flexible offering remains stable, however our penetration into the existing market is the key reason for the improved sales performance during the last quarter.

Operational Restructuring and New Marketing Initiatives

The German operations were significantly restructured in December 2009, at which time Andrew Coombs was appointed Chief Executive Officer of Sirius Facilities GmbH, our German operating business. The headcount in Germany was reduced from 183 to 152, which is expected to provide an annual cost saving of €1m in the year ending March 2011, notwithstanding potential additions to the sales team. At the same time the existing team was restructured to expand the sales force from 20 to 40, which has had a positive and sustained impact on lettings. In addition to the expansion of the sales team, the introduction of new marketing initiatives has resulted in monthly sales enquiries increasing from an average of 437 per month from Q1 until Q3 to 847 per month in Q4 of the year under review. The more targeted approach to marketing includes a significantly expanded online presence at no additional cost. The more sophisticated use of search engine optimisation and pay per click technology has been extremely effective in increasing our online profile.  Website traffic is now averaging 8,000 hits per month in January to April 2010, up from an average of 6,000 per month in the period April to December 2009. 

New Lettings                             

During the year under review we achieved new lettings of 106,847 sqm and we had 115,860 sqm of space vacated.

Most significantly, during January to March we achieved new lettings of 44,033 sqm, and had move outs of 21,991 sqm, giving a net occupancy improvement in this quarter. The average rental value achieved on new lettings in this time was €4.39 psm, compared to the average rate across the portfolio of €4.25 psm. The number of deals signed in Q4 was 199 compared to an average of 81 per quarter for the previous 3 quarters. The average space let was between 400 to 700 sqm per deal, as opposed to an average of 960 sqm per tenant currently let across the portfolio, reflecting that the majority of space was let to the SME market. Within that the mix has remained broadly stable between office space, storage, and light industrial space. Our ability to provide flexible, mixed-use space is proving very attractive to the SME market, with office and storage, and office and light industrial solutions proving popular combinations.  

Post the year end, during April and May, we achieved new lettings of 20,556 sqm. The average rate achieved on new leases post the year end is €4.15 psm.

Portfolio analysis                      

The average rental rate achieved across the portfolio now stands at €4.25 per sqm. Our tenant base now consists of 862 tenants with an average lease length to the first break option of 3.0 years. Given the flexible nature of our offering and leases, 198,482 sqm of space is due for renewal over the 12 months to March 2011. The top 50 tenants represent 67% of the gross rent roll, at an average lease length of 3.5 years remaining, and are an ongoing focus for senior management. Only 13% of these tenants' leases are due for renewal within the next financial year. Circa 15,000 sqm will be vacated by Siemens in June and September 2010 at one of our Munich sites.   

There has been continued good demand for our Smartspace initiative. 10,200 sqm has been converted to the Smartspace product, of which 53% is let at an average of €9.11 psm. Smartspace is a particularly popular concept which meets a specific market need for highly flexible workspace. Given its continued success we plan to further expand this product into the portfolio.

Cost Improvements & Other Revenue Streams

We have implemented a number of initiatives to reduce non-recoverable service charge costs of the portfolio as well as reducing the business overheads.  The three biggest service charge costs are utilities, facility management and maintenance, which make up approximately 80% of total service charge costs. Continued improvement in recoverability will be achieved by:

·      Converting tenants to Sirius leases which have better cost recovery terms.  As at March 2010 63% of leases are on these terms compared to 48% at the outset of the financial year.

·      More comprehensive metering of utilities.  We expect heating, gas, electricity and water supplies to be fully metered to allow specific allocation of costs by September 2010.

·      Optimisation of facility management.  A significant programme is underway to utilise the capex invested to date to reduce facility management and property maintenance costs. In addition, systems have been created to specifically allocate these costs to areas which provide better recoverability and transparency to tenants.

Through increased transparency and improved allocation of costs we have been able to demonstrate the actual level of service charge costs to tenants and have consequently been able to increase the monthly prepayments we receive to cover these costs, from €1.4m to €2.0m in the year on a like-for-like basis, which significantly improves cash flow.

We also remain focused on reducing business overheads. When the current initiatives programmes move closer to completion, we believe there remains further scope for overhead reductions in future years.

We see further opportunity to create additional revenue streams over the next two years by providing additional services to customers, such as telecom and data services (broadband), as well as focusing on driving the performance of the conferencing and virtual office businesses.  These additional revenues come with very high margins and are expected to have a significant impact on the Company's profitability in future years.

Consolidated statement of comprehensive income For the year ended 31 March 2010		Year ended 31 March 2010	Year ended 31 March 2009
	Notes	€000	€000
Gross rental income	3	44,002	43,742
Direct costs	4	(20,162)	(19,271)
Net rental income		23,840	24,471
Deficit on revaluation of investment properties	9	(29,969)	(42,721)
Administrative expenses	4	(5,147)	(5,159)
Other expenses	4	(2,143)	(947)
Operating loss		(13,419)	(24,356)
Finance income	5	93	1,714
Finance expense	5	(17,460)	(15,219)
Change in fair value of derivative financial instruments		(940)	(13,523)
Loss before tax		(31,726)	(51,384)
Taxation	6	1,712	(1,283)
Loss for the year		(30,014)	(52,667)
Loss attributable to:
Owners of the Company		(29,889)	(51,989)
Non-controlling interests		(125)	(678)
Loss for the year		(30,014)	(52,667)
Earnings per share
Basic and diluted, for loss for the year  attributable to ordinary equity holders of the Parent Company	7	(9.89)c	(17.05)c

Consolidated statement of financial position As at 31 March 2010			2010	2009
	Notes		€000	€000
Non-current assets
Investment properties	9		500,010	500,400
Investment property under construction	10		-	2,222
Plant and equipment			4,754	3,452
Total non-current assets			504,764	506,074
Current assets
Trade and other receivables	11		12,110	7,586
Prepayments			133	136
Cash and cash equivalents	12		33,401	29,652
Total current assets			45,644	37,374
Total assets			550,408	543,448
Current liabilities
Trade and other payables	13		(18,445)	(18,248)
Interest-bearing loans and borrowings	14		(6,860)	(102,447)
Current tax liabilities			(381)	(1,663)
Derivative financial instruments			(14,463)	(13,523)
Total current liabilities			(40,149)	(135,881)
Non-current liabilities
Trade payables			(450)	-
Interest-bearing loans and borrowings	14		(300,930)	(167,821)
Deferred tax liabilities	6		(1,629)	(2,482)
Total non-current liabilities			(303,009)	(170,303)
Total liabilities			(343,158)	(306,184)
Net assets			207,250	237,264
Equity
Issued share capital	15		-	-
Other distributable reserve			300,111	300,111
Retained earnings			(93,669)	(63,780)
Total equity attributable to the equity holders of the Parent Company			206,442	236,331
Non-controlling interests			808	933
Total equity			207,250	237,264

          Consolidated statement of changes in equity

          For the year ended 31 March 2010

		Issued share capital	Other distributable reserve	Retained earnings	Total equity attributable to holders of the Parent Company	Non-controlling interests	Total equity
	Notes	€000	€000	€000	€000	€000	€000
As at 31 March 2008		-	311,625	(7,258)	304,367	1,611	305,978
Loss for the year		-	-	(51,989)	(51,989)	(678)	(52,667)
Own shares acquired		-	(11,514)	-	(11,514)	-	(11,514)
Equity dividends	16	-	-	(4,533)	(4,533)	-	(4,533)
As at 31 March 2009		-	300,111	(63,780)	236,331	933	237,264
Loss for the year		-	-	(29,889)	(29,889)	(125)	(30,014)
As at 31 March 2010		-	300,111	(93,669)	206,442	808	207,250

Consolidated cash flow statement For the year ended 31 March 2010		Year ended 31 March 2010	Year ended 31 March 2009
	Notes	€000	€000
Operating activities
Loss before tax		(31,726)	(51,384)
Deficit on revaluation of investment properties	9	29,969	42,721
Change in fair value of derivative financial instruments		940	13,523
Depreciation	4	610	416
Finance income	5	(93)	(1,714)
Finance expense	5	17,460	15,219
Cash flows from operations before changes in working capital		17,160	18,781
Changes in working capital
Increase in trade and other receivables		(4,450)	(2,228)
(Decrease) / Increase in trade and other payables		(1,008)	3,791
Taxation paid		(290)	-
Cash flows from operating activities		11,412	20,344
Investing activities
Purchase of investment properties		(1,442)	(138,187)
Development expenditure		(25,672)	(22,137)
Purchase of plant and equipment		(1,356)	(722)
Proceeds on disposal of plant and equipment		-	89
Interest received		93	1,703
Cash flows used in investing activities		(28,377)	(159,254)
Financing activities
Dividends paid to equity holders of the Parent Company	16	-	(4,533)
Purchase of own share capital		-	(11,514)
Proceeds from loans		44,725	178,110
Repayment of loans		(8,222)	(29,309)
Finance charges paid		(15,789)	(13,715)
Cash flows from financing activities		20,714	119,039
Increase / (decrease) in cash and cash equivalents		3,749	(19,871)
Cash and cash equivalents at the beginning of the year		29,652	49,523
Cash and cash equivalents at the end of the year	12	33,401	29,652

.

Notes to the consolidated financial statements

For the year ended 31 March 2010

1.             Basis of preparation

The financial information is abridged and does not constitute the Group's full Financial Statements for the year ended 31 March 2010, but has been prepared under International Financial Reporting Standards ("IFRSs") as adopted for use in the EU.

2.             Operating segments

Segment information is presented in respect of the Group's operating segments. The operating segments are based on the Group's management and internal reporting structure. Segment results and assets include items directly attributable to a segment as well as those that can be allocated to a segment on a reasonable basis.

Management considers that there is only one geographical segment which is Germany and one reporting segment which is investment in commercial property.

3.             Revenue

	Year	Year
	ended	ended
	31 March	31 March
	2010	2009
	€000	€000
Rental income from investment properties	44,002	43,742

4.             Operating loss

The following items have been charged or credited in arriving at operating loss:

Direct costs

		Year	Year
		ended	ended
		31 March	31 March
		2010	2009
	Notes	€000	€000
Service charge income		(26,570)	(18,965)
Service charge expenditure and other property costs		41,726	33,633
Irrecoverable property costs		15,156	14,668
Property management fee		1,748	1,496
Asset management fee		2,998	2,834
Development fee		260	273
		20,162	19,271

4.             Operating loss continued

Administrative expenses

	Year	Year
	ended	ended
	31 March	31 March
	2010	2009
	€000	€000
Audit fee	251	253
Legal and professional fees	2,743	2,763
Other administration costs	904	2,143
Abortive acquisition costs	1,249	-
	5,147	5,159

During the year fees of €436,623 (2009: €155,239) were incurred with the auditors and their associates in respect of other non-audit services.

Other expenses

	Year	Year
	ended	ended
	31 March	31 March
	2010	2009
	€000	€000
Directors' fees	178	196
Depreciation	610	416
Bank fees	467	120
Marketing and other expenses	888	215
	2,143	947

5.             Finance income and expense

	Year	Year
	ended	ended
	31 March	31 March
	2010	2009
	€000	€000
Bank interest income	93	1,714
Finance income	93	1,714
Bank interest expense	(16,355)	(14,232)
Amortisation of capitalised finance costs	(1,105)	(987)
Finance expense	(17,460)	(15,219)
Net finance expense	(17,367)	(13,505)

6.             Taxation

Consolidated statement of comprehensive income

	Year	Year
	ended	ended
	31 March	31 March
	2010	2009
	€000	€000
Current income tax
Current income tax charge	(438)	(650)
Adjustment in respect of prior periods*	1,297	-
	859	(650)
Deferred tax
Relating to origination and reversal of temporary differences	853	(633)
	853	(633)
Income tax credit/(expense) reported in the statement of comprehensive income	1,712	(1,283)

* During the year under report the German government made tax changes in light of an economic growth programme. The most important change for the Group is the increase of the interest threshold from €1 million to €3 million retrospectively from 1 January 2008.

The income tax rate applicable to the Company in Guernsey is nil. The current income tax charge of €438,000 represents tax charges on profit arising in Germany that is subject to corporate income tax of 15.83%. The effective income tax rate for the period differs from the standard rate of corporation tax in Germany. The differences are explained below:

	Year		Year
	ended		ended
	31 March		31 March
	2010		2009
	€000		€000
Loss before tax	(31,726)		(51,384)
Loss before tax multiplied by rate of corporation tax in Germany of 15.83% (2009: 15.83%)		(5,022)	(8,132)
Effects of:
Income exempt from tax	(3,048)		(3,429)
Tax allowable depreciation	(1,634)		(1,311)
Non-taxable items including revaluation movements	6,156		10,986
Tax losses utilised	(188)		(356)
Tax losses not utilised	4,085		2,642
Relating to origination and reversal of temporary differences	(853)		633
Adjustments in respect of prior periods	(1,297)		-
Other	89		250
Income tax (credit) / expense in the statement of comprehensive income	(1,712)		1,283

6.             Taxation continued

Deferred tax liability

	2010	2009
	€000	€000
Opening balance	2,482	1,849
Revaluation of investment properties to fair value	(853)	633
Balance as at year end	1,629	2,482

The Group has tax losses of €53,995,447 that are available for offset against future profits of its subsidiaries in which the losses arose. Deferred tax assets have not been recognised in respect of the revaluation losses on investment properties and interest rate swaps as they may not be used to offset taxable profits elsewhere in the Group and realisation is not assured.

7.             Earnings per share

The calculation of the basic, diluted and adjusted earnings per share is based on the following data:

	Year	Year
	ended	ended
	31 March	31 March
	2010	2009
	€000	€000
Earnings
Loss for the year attributable to the equity holders of the parent	(29,889)	(51,989)
Earnings	(29,889)	(51,989)
Add back revaluation deficits (net of related tax)	29,093	43,354
Add back change in fair value of derivative instruments	940	13,523
Add back non recurring  costs	1,499	-
Adjusted earnings	1,643	4,888
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share	302,223,176	304,840,217
Weighted average of ordinary shares for the purpose of adjusted earnings per share	302,223,176	304,840,217
Basic and diluted earnings per share	(9.89)c	(17.05)c
Adjusted earnings per share	0.54c	1.60c

The number of shares has been reduced by 25,576,824 shares that are held by the Company as Treasury Shares at 31 March 2010, for the calculation of basic and adjusted earning per share.

The Directors have chosen to disclose adjusted earnings per share in order to provide a better indication of the Group's underlying business performance; accordingly it excludes the effect of abortive acquisition costs and new financing fee, deferred tax and the revaluation deficits on the investment properties and derivative instruments.

As there are no share options in issue, the diluted earnings per share is identical to the basic earnings per share.

8.             Net assets per share

	2010	2009
	€000	€000
Net assets
Net assets for the purpose of assets per share (assets attributable to the equity holders of the parent)	206,442	236,331
Deferred tax relating to investment properties	1,629	2,482
Derivative financial instruments	14,463	13,523
Adjusted net assets attributable to equity holders of the parent	222,534	252,336
Number of shares
Number of ordinary shares for the purpose of net assets per share	302,223,176	302,223,176
Net assets per share	68.31c	78.20c
Adjusted net assets per share	73.63c	83.49c

The number of shares has been reduced by 25,576,824 shares that are held by the Company as Treasury Shares at 31 March 2010, for the calculation of basic and adjusted earning per share.

As there are no share options, the diluted net assets per share is identical to net assets per share.

9.             Investment properties

	2010	2009
	€000	€000
Opening balance	500,400	375,950
Additions	29,579	167,171
Deficit on revaluation	(29,969)	(42,721)
Balance as at year end	500,010	500,400

The fair value of the Group's investment properties at 31 March 2010 has been arrived at on the basis of a valuation carried out by DTZ Zadelhoff Tie Leung GmbH, an independent valuer.

The value of each of the properties has been assessed in accordance with the RICS Valuation Standards on the basis of market value. Market value was primarily derived using a ten-year discounted cash flow model supported by comparable evidence. The discounted cash flow calculation is a valuation of rental income considering non-recoverable costs and applying a discount rate for the current income risk over a ten-year period. After ten years a determining residual value (exit scenario) is calculated. A cap rate is applied to the more uncertain future income, discounted to a present value.

10.          Investment property under construction

	2010	2009
	€000	€000
Opening balance	2,222	-
Additions	-	19,883
Transfers	(2,222)	(17,661)
Balance as at year end	-	2,222

11.          Trade and other receivables

	2010	2009
	€000	€000
Trade receivables	6,112	2,343
Other receivables	5,998	5,243
	12,110	7,586

12.          Cash and cash equivalents

	2010	2009
	€000	€000
Cash at banks and in hand	33,401	29,652

Cash at banks earns interest at floating rates based on daily bank deposit rates. The fair value of cash is €33,401,000 (2009: €29,652,000).

As at 31 March 2010, €6,477,671 (2009: €5,556,149) of cash is held in blocked accounts. Of these €1,702,076 (2009: €4,937,096) are under the control of lenders who have made loans to the Group to be used for capital expenditure on the properties. Balances relating to deposits received from tenants total €968,769 (2009: €619,053) and an amount of €15,507 (2009: €nil) relates to funds held on an escrow account for a supplier.

Under the conditions of the consolidated loan agreement with ABN Amro Bank N.V. (see note 14) where the interest cover ratio ("ICR") falls below 1.30, a cash trap position comes into effect. Any surplus cash in the payment account after loan interest and amortisation is taken must remain there to provide security against future payments to the bank. The cash trap provisions will remain in place until the ICR is above 1.30 for two consecutive quarters at which point the surplus on account is released to the Group. At 31 March 2010 an amount of €3,791,319 was held under the cash trap provisions.

13.          Trade and other payables

	2010	2009
	€000	€000
Trade payables	8,394	3,970
Accrued expenses	3,585	4,405
Accrued interest	2,401	1,675
Other payables	3,430	3,698
Related party payables	635	4,500
	18,445	18,248

Terms and conditions of the above financial liabilities:

§  trade payables are non interest-bearing and it is the Group's policy to pay within the stated terms which vary from 14 to 60 days. The exception are certain development suppliers where payment plans have been agreed to extend the payment days to a longer period;

§  other payables are non interest-bearing and as above are paid within stated terms.

14.          Interest-bearing loans and borrowings

	Effective
	interest		2010	2009
	rate%	Maturity	€000	€000
Current
ABN Amro loan -  fixed rate facility	5.85	15 October 2012	1,808	98,963
Berlin-Hannoversche Hypothekenbank AG loan - fixed rate facility	5.46	31 March 2013	1,161	1,010
Berlin-Hannoversche Hypothekenbank AG loan - hedged floating rate facility	Hedged floating*	31 March 2013 - 30 June 2013	3,778	3,519
Berlin-Hannoversche Hypothekenbank AG loan - capped floating rate facility	Capped floating**	31 December 2013	1,216	-
Capitalised finance charges on all loans			(1,103)	(1,045)
			6,860	102,447
Non-current
ABN Amro loan -  fixed rate facility	5.85	15 October 2012	94,484	-
Berlin-Hannoversche Hypothekenbank AG loan - fixed rate facility	5.46	31 March 2013	48,498	49,748
Berlin-Hannoversche Hypothekenbank AG loan - hedged floating rate facility	Hedged floating*	31 March 2013 - 30 June 2013	117,120	120,936
Berlin-Hannoversche Hypothekenbank AG loan -  capped floating rate facility	Capped floating**	31 December 2013	42,891	-
Capitalised finance charges on all loans			(2,063)	(2,863)
			300,930	167,821
Total			307,790	270,268
The borrowings are repayable as follows:
On demand or within one year			7,963	103,493
In the second year			8,679	4,787
In the third to fifth years inclusive			294,314	165,896
Total			310,956	274,176

14.          Interest-bearing loans and borrowings continued

            *          The average fixed rate of the swap contracts is 4.74%, plus an average margin of 1.12% bringing the total cost to 5.86%.

            **         This floating rate facility is capped at 5.98%. Due to the current low market interest rates, the interest at year end for this loan is 2.79%.

The Group has pledged 33 (2009: 33) properties to secure the interest-bearing debt facilities granted to the Group. The 33 properties had a combined valuation of €453,970,000 as at 31 March 2010 (2009: €449,850,000).

ABN Amro Bank N.V.

As at the previous year end the Group was in breach of the LTV covenant. During the year the Group rectified this by consolidating its two portfolios into one for a one off fee of €250,000 plus legal costs and an increase in the costs of borrowing of 40 basis points. In addition the facility was paid down by €975,000 plus an early payment penalty. Consequently, the loan is reflected as non-current whereas this was current for 2009.

This facility had €100,951,940 drawn down, of which €4,659,884 (2009: €1,988,311) has been amortised, resulting in a net liability of €96,292,056 (2009: €98,963,629) at year end. The interest is fixed at a weighted average interest rate of 5.85% per annum. The final repayment date is 15 October 2012. This loan is secured over 16 property assets and is subject to various covenants with which the Group has complied. Reference is made in note 12 cash and cash equivalents about the cash trap.

Berlin-Hannoversche Hypothekenbank AG

Facilities of €224,000,000 have been granted by Berlin-Hannoversche Hypothekenbank and this facility was fully drawn down after €45 million was received in the year. To date €9,336,153 (2009: €3,786,125) has been amortised, resulting in a net liability of €214,663,847 (2009: €175,213,875) at year end. The facility is split into three portfolios: Portfolio I is split with either an interest rate of 1.18 margin over three months EURIBOR fixed by a SWAP at 4.42% or a fixed rate of 5.46%; Portfolio II has an interest rate of 1.08 margin over three months EURIBOR fixed by a SWAP at 4.95%; and Portfolio III which is a floating interest rate capped at 5.98%. This loan is secured over 17 property assets and is subject to various covenants with which the Group has complied.

A summary of the Groups debt covenants are set out below:

	Total	Value of
	loan	secured	Loan-to-				Interest
	outstanding	properties	value		Interest	Debt service	cover ratio/
	at 31 March	at 31 March	ratio	Loan-to-	cover ratio	cover ratio	debt service
	2010	2010	at 31 March	value	at 31 March	at 31 March	cover ratio
	€000	€000	2010	covenant	2010	2010	covenant
ABN Amro loan	96,292	129,930	74.1%	85.0%	1.28	n/a	1.25
Berlin-Hannoversche Hypothekenbank AG loan - Portfolio I, II and III	214,664	324,040	66.2%	77.0%	n/a	1.46	1.10
Unencumbered properties	-	46,040	n/a
Total	310,956	500,010	62.2%

15.          Issued share capital

		Share
	Number	capital
Authorised	of shares	€
Ordinary shares of no par value	Unlimited	-
As at 31 March 2010	Unlimited	-
		Share
	Number	capital
Issued and fully paid	of shares	€
Ordinary shares of no par value
Issued ordinary shares	327,800,000	-
Shares bought back and held in treasury	(25,576,824)	-
As at 31 March 2010	302,223,176	-

Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.

The Company holds 25,576,824 of its own shares which continue to be held as treasury. No share buy backs were made in the year.

16.          Dividends

	2010	2009
Ordinary dividends paid	€000	€000
Final dividend of 1.5c for the period ended 31 March 2008	-	4,533

No dividends were paid for the year ending March 2009. In order to sustain investment in the Group's portfolio whilst also ensuring cash resources are preserved the Board has proposed to not pay a dividend in the year ended March 2010.

 

END

 

 

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